Despite pockets of weakness, equity markets performed pretty well on Wednesday. The iShares Russell 2000 (IWM) closed the session nearly 1.7% higher, while the PowerShares QQQ Trust (QQQ), SPDR S&P 500 (SPY) and SPDR Dow Jones Industrial Average (DIA) all gained between 0.6% and 0.8%.The bottom line is that while many overbought/oversold measures are flashing warning signs, dip buyers appear undeterred and willing to participate during 15- or 20-handle intraday dips. (iShares Russell 2000 is part of TheStreet's Growth Seeker portfolio.)
As far as what struggled on Wednesday, I'm sure everyone saw Yum! Brands (YUM) get taken to the woodshed. The stock lost nearly 19% on the day and, as you can imagine, is now an unquestionably broken stock. From a technical standpoint, there's no reason to devote much time to this name.
Other names aggressively sold on the day, many of which are well-known retailers, such as Nordstrom (JWN), Dollar Tree (DLTR), PVH Corp. (PVH) and Dollar General (DG). Of these stocks, look for support between $67 and $67.50 on JWN, and $65 to $66 on DG.
Moving on to the E-Mini S&P 500 futures (Es), it's important to recognize that while the higher time-frame trend is still negative, the short-term trend is supportive of further gains. Put another way, while swing traders should be cautious chasing the Es through the 50-day simple moving average and the psychologically important 2000 level, day time-frame traders must respect the ongoing fact that intraday dips are attracting buyers.
With the above in mind, traders stalking a more aggressive short against the upper end of composite balance should be on the lookout for three specific developments. The first would be a session close well beneath the midpoint of the day. The closer to session lows, the better.
Second, and more important than closing beneath the session's midpoint, would be a day time-frame profile exhibiting clear and unquestionable bullish excess. Excess provides us with an area to sell against. And as of Wednesday's close, we do not have such an area.
Third, and equally important to excess, is a session that gains acceptance beneath a prior session low. As we've discussed over the years, a clear indication of a bullishly trending market is one that consistently finds support above a prior session's lows. Value migration beneath a prior session's lows would expose a meaningful chink in the bulls' armor.
As far as Thursday's Es auction is concerned, I want to begin the session with a focus on 1986 to 1987.25 and 1967.50. In a nutshell, bullish extension beyond 1987.25 puts 1995.50 and the big figure within reach. Value migration beneath 1967.50 would offer an indication that a motivated seller had re-entered the auction.
All trading beneath 1987.25 and 1967.50 should be viewed as rotational, with 1977.25 acting as our day time-frame pivot.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at email@example.com or posted to my Twitter feed @ByrneRWS